Loehmann’s Seeks Bankruptcy Protection

Loehmann’s Inc., the retailing icon that brought designer clothing to Main Street, on Tuesday sought bankruptcy protection from its creditors.

The 78-year-old discounting pioneer, which lately has faced competition from other off-price chains, said it voluntarily filed for Chapter 11 reorganization and has secured debtor-in-possession financing.

The Bronx, New York-based chain, long a mecca for bargain-hungry shoppers with expensive taste, has watched its sales slip in recent years, even as management sought to bring what had been a no-frills operation into the 1990s by introducing changes such as a frequent-shopper program and accepting credit cards. The chain now has 69 stores and about 2,800 employees.

Its competitors, meanwhile, are flourishing. TJX Cos., the No. 3 U.S. clothing retailer, said Tuesday that its fiscal first-quarter profit rose 45% on strong sales gains at its 613 T.J. Maxx stores and 480 Marshall’s off-price stores, and on cost savings that resulted from better inventory management. Net income for the period ended May 1 rose to $127.7 million, or 39 cents a share, from $87.8 million, or 26 cents, a year earlier. The Framingham, Mass.-based company had been expected to earn 35 cents. Sales rose 10% to $1.95 billion.

In a statement, Robert Friedman, Loehmann’s chairman and chief executive, said about the chain’s future: “Loehmann’s has a time-tested concept, loyal customer base and strong name recognition [that] we believe will enable us to emerge from this process as a more competitive company.”

Part of Loehmann’s’ long-term strategy has included closing smaller stores, opening larger ones and taking on men’s and children’s lines.

The company’s latest financial results were significantly below plan, putting the retailer at risk on its trade credit for the second half of the 1999 fiscal year ended Jan. 30, Loehmann’s said. It reported a fourth-quarter loss of 61 cents a share, compared with a loss of $1.73 for the period for the ’98 fiscal year.

“Over the past 18 months, we have implemented several strategic initiatives, including a more diversified merchandise mix, an aggressive marketing campaign and improved operating efficiencies. . . . The Chapter 11 filing will provide additional time to build on these efforts and to take the steps necessary to ensure a strong future for Loehmann’s,” Friedman said.

In the petition filed in U.S. Bankruptcy Court in Wilmington, Del., the company listed $188.6 million in assets and $184 million in debts. Loehmann’s said it had secured a $75-million loan from Congress Financial to continue operating during reorganization. Loehmann’s also said it would stop interest payments on its 11.875% senior notes, due in 2003.

Eliot Green has been named interim chief financial officer, succeeding Dennis Hernreich, who has left to pursue other interests, according to a company spokesman.

Trading in Loehmann’s stock was halted Tuesday in conjunction with the filing. The stock closed Monday at 94 cents, down 9 cents, on Nasdaq.